ACTA and Access to Medicines

Sean FlynnProgram on Information Justice and Intellectual PropertyAmerican University Washington College of LawApril 28, 2010

I was asked to provide some comments on the impact of ACTA
on access to medicines for the April 28 meeting of the Trans Atlantic Consumer
Dialogue. This is an extended version of my remarks.

My ultimate concern is that his agreement extends incredibly
far beyond the core subject of true counterfeiting, which is the intentional deception of consumers through spurious marks that are substantially identical to registered trademarks.
The agreement as it is written now applies a wide range of counterfeiting remedies -- from border seizures to destruction of goods and criminal sanctions -- to goods that are suspected merely of infringing trademarks by being similar, albeit not intentionally identical. It also continues to have language extending the agreement's scope to all intellectual property rights, including patents, and proposes requiring in-transit border measures that would make the "Dutch Seizure" problem of confiscating medicines in transit between developing countries much more common.

GENERAL COMMENTS

The draft is a fairly
clear product of close consultation with rights holders with little concern
for or representation of the interests of competitors. Increased enforcement
procedures are always specific and mandatory; mention of intellectual property
limitations and exceptions is always proposed as permissive. There is a large
deal of language mandating that procedural requirements for initiating enforcement
procedures should not “deter” their use by rights holders. But there is very
little inclusion of measures, including basic norms like notice and rights of
reply and punishment of frivolous and bad faith use of procedures, that seek to
avoid the overuse of enforcement procedures deter and create barriers to entry
by legitimate competitors. The text is a foreseeable product of a consultation
process that has been focused the concerns of a small number of large content
owning industries.

CHAPTER 1

SECTION A

ARTICLE 1.1: NATURE AND SCOPE

ACTA states that nothing in the agreement “shall derogate
from any international obligation” with respect to any parties obligations to
another. Do the parties consider human rights treaties and the Doha Declaration
to be such agreements? This provision should explicitly reference the Doha Declaration
and human rights obligations to promote access to medicines through use of all
TRIPS flexibilities. But such references would be a bit meaningless if the agreement
continues to include TRIPS plus provisions on patent enforcement measures
without adequate exceptions and limitations.

SECTION B: GENERAL DEFINITIONS

There is no definition of counterfeiting in the definitions
section. That is a bit remarkable in an agreement with the word “counterfeiting”
in its title. Instead, it defines “intellectual property” as all rights in
TRIPS. And thereby expands the scope of the agreement to trademarks, patents,
copyrights, data protection, integrated circuit protections, trade secrets, and
other laws.

There needs to be
definitions of trademark “counterfeit” versus “infringement.” The agreement
often uses the words interchangeably. But they are not the same in most
trademark laws. In the US, something can be infringing by being merely
confusingly similar, regardless of criminal intent. A counterfeit is a narrower
class of spurious marks that are intentionally identical to a protected
mark with the purpose to deceive consumers. This agreement should be limited to
counterfeits, as the title implies.

INJUNCTIONS

In Article 2, there is bracketed text stating that there must
be either [judicial] or [administrative] procedures for enforcing any
[intellectual property right]. Art. 2.x para 1 states that each country shall authorizes
judicial injunctions for the enforcement of all [intellectual property rights].
In brackets, the language is made subject to statutory limitations. Read together,
and depending on which way the bracketed text comes out in the final
negotiation, these provisions could make
it impossible for a country to adopt an administrative liability rule system
in which the only remedy for certain infringements (e.g. where access to
essential goods and services is at issue) would be an administrative just
compensation determination scaled to promote access and affordability. Such a
system is one potential best practice for taking advantage of TRIPS Art. 31 in developing
countries.

Art. 2X para 2 (bracketed, EU proposal) proposes injunctions
against third parties “whose services are used . . . to infringe an
intellectual property right.” It is a US proposal to expand this provision to
all intellectual property rights, which would include patents. As written, this would appear to allow injunctions against
active pharmaceutical ingredient providers whose products are used by generic companies
who are found to “infringe” a trademark or patent law, even in
unintentionally. This is a pretty draconian remedy for a wide range of
infringements and would likely alter US law dramatically.

Art. 2.2. DAMAGES

Para 1(b) states that judicial authorities shall consider a
range of factors for damage determinations, including “the value of the
infringed good or service, measured by . . . the suggested retail price.” The
use of suggested retail price for a lost profit calculation applied to patents may thwart the use of a liability rule
system based on reasonable royalties to promote access to medicines. Imagine
the very real case of an AIDS drug sold at a suggested retail price of $12,000
/year and a generic price of $85. The reasonable royalty from the infringer in
a liability rule system committed to promoting access to medicines may be 4-10%
of sales (to take UNDP suggestion). Under a retail price model, it would be a thousand
fold royalty per sale. That would defeat the purpose of the Doha declaration in
permitting the use of TRIPS flexibilities to promote access to medicine.

ARTICLE 2.3: OTHER REMEDIES

Para 1 contains bracketed text requiring that in any case of
“[infringing an intellectual property right],” the good shall be destroyed.
This an extremely broad proposal that would
require destruction of unintentionally “similar” marks and technical violations
of patents. US law only requires the destruction of counterfeit goods, not
goods that merely infringe a trademark by being “confusingly similar.”

Para 2 proposes also requiring the destruction of materials
and implements used to infringe, and proposes expanding this to all
infringements of intellectual property rights. As proposed, this could mean
that courts would order the destruction
of active pharmaceutical ingredient plants if their products are used in
generic drugs found to violate a patent or a trademark, even if
unintentional. This is extreme on its face, and would surely require changes in
US law.

SECTION 2: BORDER MEASURES

ART 2X SCOPE OF BORDER MEASURES

The border chapter does
not exclude patents as some of the negotiators claimed in press releases. Paras
1, 2 and 3 all have bracketed language requiring or permitting the border
measures chapter to be applied to all “intellectual property rights.” That is
an incredibly broad proposal which would require extending border seizures for
alleged violations of date protection rules, trade secrets, patents and everything
else covered by by TRIPS.

The chapter also explicitly – at the US suggestion – proposes
to apply to”in-transit” shipments. This raises major concerns about how the
agreement will promote, legitimate and expand the problem of in-transit
seizures of goods exemplified by the so-called “Dutch seizure” cases.

The Dutch seizures occurred when Netherlands and some other
European countries began suspending the release of drugs that were lawfully
produced in India and would be lawfully consumed in the receiving countries but
would violate patent laws if released in the EU. Applying the EU law to the
products in EU airports and ports on their way to other countries, the drugs were
seized and denied to the ultimate consumers.

It looks like it is Australia, Canada and Singapore are pushing
for this expansion beyond criminal counterfeiting.

Art. 2.6 requires border suspensions upon applications by
rights holders. The text is highly bracketed. Read with fn 22 – which says you
should apply the local law of the border country in which an application is
brought – the Article can be read to require Dutch seizure problems in all ACTA
members. One version of the article would require seizures of a good in-transit
between other countries if the good is suspected of infringing the transit
country’s law (which includes all intellectual property law in one bracketed
suggestion), even if the good does not infringe the producing or ultimate destination
country. This is the basic fact pattern of the Dutch seizure debacle.

As discussed above, Art. 2.11 echoes the remedies chapter in
proposing in bracketed text to authorize the destruction of goods found to “infringe”
a trademark, even if not a counterfeit. Bracketed text also proposes to require
destruction of a product that infringes any IP right, an incredibly broad
proposal that one assumes will be narrowed.

The section is likely to be narrowed to the US standard,
which is that infringing goods can be
suspended but only counterfeits (intentionally
and fraudulently labeled with identical marks) destroyed. But the globalization
of this standard, which extends significantly beyond the problem of true
counterfeits, should worry access to medicines advocates. The agreement would
(and likely will) authorize suspension of goods upon a “prima facie” finding by
a border guard that are grounds to “suspect” the product of “infringing” a
trademark by being “confusingly similar.” This is a detailed fact-specific
determination that is prone to mistaken conclusions and strategic misuse by
rights holders to thwart competition. In the case of access to medicines,
wrongful detentions can cost lives dependent on access to affordable drugs. All
the border measures provisions in the agreement should be limited to true
criminal counterfeiting, not mere infringements.

The problem with trademark infringements is particularly
complex and worrying for generic medicines. Generic labels are required to be similar
to the brands. They must use the same words identifying active ingredients, the
same warnings and indications and other information. In addition, they often
desire to have similar packaging and presentation as the brand drugs to help
patients switch between brand and generic with comfort. Requiring border
officials to identify which medicine labels are too “similar” to allow into the
market is bound to lead to many more supply interruptions than if the measures
were limited to criminally counterfeit products that intentionally use
identical marks.

Another concern is that there is no process required for a
reply where the TM owner makes a complaint to customs alleging suspected
infringement. At minimum, public interest concerns, especially for medicines, demand
more protections to thwart wrongful suspensions of legitimate competing
products.